St George offers $50,000 to switch banks

Alluring offer . . . St George is also doing deals on interest rates to grow its home loan business.
Photo: Nic Walker

by
George Liondis

St George Bank
is offering business borrowers up to $50,000 to switch from rival lenders as it turns to corporate Australia in a bid to arrest a lending slump.

The
Westpac Banking Corporation
subsidiary, which has been singled out by chief executive
Gail Kelly
as an underperformer, has also moved to kick-start its home loan business by extending the time frame of interest rate discounts.

St George chief operating officer Andrew Moore said the bank, which was acquired by Westpac in 2008, was making a major push to reignite its lending book after it stalled in the aftermath of the financial crisis.

“We are looking to acquire new customers, which is a bit of a change from the approach at St George over the last few years, which have been dominated by the merger with Westpac and the global financial crisis. Our focus was on continuing to service existing customers," he said.

Under the offer to lure corporate Australia, St George will pay back as much as 0.5 per cent of the size of a loan to customers who switch their business to the bank, up to a maximum of $50,000.

The plan, which is valid until July 31, echoes moves in the home loan market by the major banks, which have offered each other’s customers cash incentives to switch as competition for borrowers heats up.

“When people are looking to switch lenders, there are a couple of impediments and one of them is cost," Mr Moore said. “Realistically at that $50,000 level, you are talking about larger corporate customers, but the switching opportunity is available to small and medium enterprises as well."

St George is under pressure to lift its game after its performance in lending slipped over the past year while it made the transition to a new ­management team and reduced its reliance on mortgage brokers to sell loans.

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While she did not disclose the extent of the damage, Ms Kelly said in February she was disappointed that St George’s lending had fallen away “quite as sharply as it did".

Just weeks later, Westpac announced that it would scrap the St George brand in Victoria and ­resurrect the Bank of Melbourne in its place.

Some investors have called for Westpac to close St George branches to save costs where there is duplication with the parent group.

Mr Moore said St George’s initiatives to reignite growth were starting to gain traction. “We had grown the business very strongly through the early stages of the GFC," he said.

“Having done that, there was a period of easing off on the growth.

“Both in terms of business lending and home loan lending . . . we ­certainly are seeing that growth ­coming back."

St George, which has its biggest presence in NSW, has a history of targeting business lending towards the commercial property market, which suffered in the aftermath of the financial crisis.

But the bank has retreated from the sector, lending $600 million less for commercial property-related deals in the first quarter of 2011.

The pullback from the sector was part of a plan to diversify St George’s business loan book, with the bank looking to lift its presence in areas such as leisure and hospitality, ­manufacturing and health.

“Historically, St George has been a big supporter of the property ­sector," Mr Moore said. “Through the GFC, we’ve slightly reduced the percentage of the portfolio that is exposed to commercial property."

Banks are pulling out all stops to attract business customers amid waning demand for loans.

The latest figures from the Reserve Bank show the volume of lending to corporate Australia dropped by 0.1 per cent in January and 2.4 per cent over the past 12 months.

Mr Moore said competition for customers was intensifying. “Competition, whether it is in the home loan market, deposits or business lending, is as strong as it has ever been. Post-GFC, we are in a lower credit growth environment. To win business at the moment, you need to really fight harder for it and when there is low credit growth you have to take customers from competitors."

In the home loan market, St George is offering a 1 percentage point discount on mortgage interest rates to new borrowers for the first year of their loan. It will also pay $700 to anyone who switches from another lender. The offer, which was due to expire in March, has been extended until the end of April.